Pension changes, restrictions on buy-to-let property and the ever-increasing dividend tax have fuelled demand for venture capital trusts (VCTs). Last year, £728 million was invested, the highest sum in a decade.
The appeal is clear: up to 30% income tax relief, tax-free dividends and a generous annual allowance of £200,000.
Performance has also helped to bolster demand. Over the past 10 years, the top 17 VCTs have more than doubled investors’ money on a net asset value (NAV) total return basis, and provided regular impressive tax-free dividends.
But there is an elephant in the room. Since 2015, VCT rules have been gradually tightened. New investment can only be into earlier-stage, riskier businesses.